R&D in the Presence of Network Externalities: Timing and Compatibility
Two rival firms decide on the time of R&D and whether the new products should be compatible. I show that network externalities may induce the firms to introduce new incompatible technologies early, which is socially harmful as the R&D costs increase, and de facto standardization becomes less likely. Compared with the equilibrium outcome, both firms may gain by delaying the introduction of incompatible technologies. By agreeing on common standards before product introduction, entry is delayed and profit may increase. An ex post optimal standardization policy may increase the incentives for early product introduction and consequently be an undesirable policy ex ante.
Volume (Year): 29 (1998)
Issue (Month): 3 (Autumn)
|Contact details of provider:|| Web page: http://www.rje.org|
|Order Information:||Web: https://editorialexpress.com/cgi-bin/rje_online.cgi|
When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:29:y:1998:i:autumn:p:531-547. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.